1. Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB)
Average Share Price Upside Potential as of November 12: 142.72%
Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB) is an American chain of casual dining restaurants, that serve gourmet burgers, brews, and other food items.
On November 6, the company announced financial results for the third quarter of 2024. Revenue was posted at $274.6 million, down by $2.9 million from last year due to the impact of the closure of nine restaurants over the past year. However, comparable restaurants revenue grew 0.6% due to an uptick in guest check average.
Restaurant-level operating profit was at 9% of the total revenue, decreasing by 210 basis points year-over-year because of a lower guest count and an increase in discount levels during the quarter. These factors also resulted in an adjusted EBITDA of $2.1 million, which fell well below the $4.7 million mark during the same period last year. As a result, Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB) posted a net loss of $18.9 million for the quarter, worsening from a loss of $8.2 million in Q3 2023.
However, there were also numerous positives from the quarter. Red Robin’s Loyalty 2.0 program’s relaunch has been a success, averaging 150,000 sign-ups per four weeks. New member transactions have surged 141% year-over-year, whereas the number of members transacting twice or more has increased by 12% compared to the prior year. Moreover, over 400,000 previously lapsed loyalty members have re-engaged with Red Robin as part of the new loyalty program.
Effective marketing strategies through digital and social media are also driving traffic to Red Robin restaurants. Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB) is also seeing improved guest satisfaction scores, which are now the highest since 2016 and above the industry average. This demonstrates the value guests perceive from Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB)’s menu upgrades and hospitality.
While the company expects ongoing promotional offers to carry a net cost in the short run, it anticipates that these will help achieve positive traffic growth and increased profitability in 2025. Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB) is the best restaurant stock to buy according to analysts, with the highest share price upside potential. Analysts also have a consensus Strong Buy rating for the stock.
Overall, RRGB ranks first among the 10 Best Restaurant Stocks To Buy According to Analysts. While we acknowledge the potential of restaurant companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than RRGB but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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